March 20th, 2015

Talking GIB-berish

by Dominic Hogg


We’ve now had more than two years of the Green Investment Bank (GIB), enough time to take a view on how green its intervention in the waste sector has been. It won’t be a surprise to hear that the answer is “not very”, but much more interesting to ask why.

Back in July 2014, the Environmental Audit Committee called on the GIB to support the circular economy, and as part of the same recommendation, called on the Government to “ensure that its policies for recovering resources and generating energy are aligned and are consistent with the waste hierarchy.”

I suppose that case by case the GIB can be said to be applying the waste hierarchy – it hasn’t invested in a landfill site yet. But its overall portfolio of investments isn’t that of an organisation striving to apply the hierarchy as a priority order.


Going on the record

Aside from a couple of CHP plants that will run on waste wood, the bank has invested, whether directly or through its fund managers, in ten waste projects. Of those, three are AD plants (with more on the way). The other seven are thermal treatment projects, although the Derby and Allerton facilities pull out a small percentage of the material at the front end for recycling.

These ten projects yield a total of 1,935k tpa of treatment capacity. Of this, 3% is for recycling, 12% for anaerobic digestion (AD) and 85% thermal energy from waste (EfW). In financial terms, out of a total investment to date of £269.7m, over 90% is in projects that are mostly or wholly EfW. The numbers would be further tilted towards EfW had the Norfolk incinerator project not been pulled by the councils involved.

By contrast, nothing has been invested in ‘recycling only’ projects. Last month’s welcome launch of a £50m Recycling and Waste (“RAW”) fund for ‘smaller-scale, innovative, recycling and waste projects’ might help the GIB break its recycling duck, but it won’t substantially change the balance. So why is its focus on the not so green end of the waste hierarchy?

They say that if your only tool is a hammer, all problems look like nails. For an investor with £3.8bn to invest in infrastructure, problems that need dollops of investment look the most pressing, making residual waste infrastructure the obvious way to go. A lot of incinerator projects were seeking investment when the GIB was established, while others suddenly found themselves in need of new finance when Defra pulled their PFI credits. But might the GIB’s portfolio rebalance towards projects further up the waste hierarchy in future?


Leave the capital

It seems questionable, absent some major changes that are outside the bank’s control. If you want to do environmentally sound things with waste management, then generally it’s not capital that you need. The most benefit comes from prevention of waste, which typically requires work on product design, communications, or incentives, not infrastructure.

The GIB is already involved in the AD sector and seems to have a pipeline of future projects, which is interesting. Even so, access to capital is currently less of a limiting factor on the development of AD than securing feedstock. Unless an AD plant can demonstrate reliable access to feedstock, investors (be they ever so green) are unlikely to be impressed with the business case. But few cash-strapped local authorities are making the small capital investment needed to introduce separate food waste collections, despite the possibility of substantial savings on residual waste treatment.

There are similar issues with infrastructure investments in recycling: unless work is done to increase capture rates, there simply won’t be much need for extra capacity. Indeed, if more material is collected in separate streams, the demand for capital investment in the recycling sector could diminish.

Thermal treatment is the only capital intensive part of the waste sector, and the one whose supply of feedstock doesn’t depend on other agents changing how they collect waste.


The environmental case on EfW incinerators is increasingly black and white. Photo by Meriol Lehmann (CC BY-NC-ND 2.0)


I don’t doubt that the GIB is trying to make the UK greener, but you can only assess whether an EfW project will be environmentally beneficial if you understand what forms of energy it will effectively displace over its lifetime. Unfortunately the GIB has failed to grasp this point, or more specifically, how to estimate what’s displaced. As a result, the GIB is investing in projects that will actually hold back progress on carbon emissions.


Working on the margins

GIB staff have told me that their approach to understanding incinerator GHG emissions is aligned with that taken by a Planning Inspector’s report in a recent inquiry. The report on the Javelin Park Incinerator in Gloucestershire, which led to Eric Pickles overturning the local planning committee’s decision to block the development, reflects on the incinerators merits, these having been debated through consultants’ reports and legal arguments at the planning appeal. The section covering greenhouse gas emissions (paragraphs 1020-1037) is, frankly, a bit of a mess, and reinforces my view that this issue should be dealt with, once and for all, outside of the inquiry context.

The GIB follows the Javelin Park planning inspector in wrongly thinking that over the life of the facility, the avoided emissions attributable to the plant’s electricity generation should be assumed remain constant over time.

However, decarbonisation of the electricity grid means the net emissions associated with an EfW plant gradually worsen (all else being equal), and once the avoided emissions fall below a specific threshold, the incinerator’s performance ends up worse than that of landfill. In the Norfolk planning inquiry, I advised that this crossover point would occur roughly half way through the plant’s expected life. That left little to choose between EfW and landfill in climate change terms over the life of the facility: with each passing year the climate change performance of EfW gets worse.


Notes and queries

The Javelin Park Planning Inspector wasn’t quite right to say:

“The assumption in the model that the electricity exported from the appeal proposal would displace that otherwise produced by a CCGT should not be criticised. This is what [Defra’s Energy from Waste: a] Guide to the Debate identifies as the current standard comparator since this is the marginal technology choice if building a new power station.”

Admittedly, the ‘Guide to the Debate’ contains a footnote which says:

“A gas fired power station (Combined Cycle Gas Turbine – CCGT) is a reasonable comparator as this is the most likely technology if you wanted to build a new power station today.”

I spotted this when the first version of the Guide was produced and raised it with Defra officials. I was told that the footnote had been written in a ‘non-technical’ way and that while CCGT’s emissions were roughly aligned with the current marginal level, ‘of course this will evolve over time, as will I suspect the footnote’. Emissions are changing considerably; the footnote, though, remains much as before, and it continues to lead to misunderstandings, even though it goes on to say:

When conducting more detailed assessments the energy offset should be calculated in line with DECC guidance using the appropriate marginal energy factor

This is clear, and directs readers to DECC guidance which supplements the Treasury’s Green Book. There, one finds a set of data tables that project marginal CO2 emission factors right through to 2100. The marginal generation figure for 2010 was indeed 0.349kg CO2e/kWh – similar to the expected output from CCGT. However, it falls away quickly over the next decade, and by 2027 is 0.171kg – leaving most EfW investments looking far from green.


Not so green as they are cabbage looking

Indeed, if you look at the main text of ‘Guide to the Debate’ rather than the footnotes, you read that:

“while electricity only plants may be beneficial over their planned lifetimes, the carbon benefits would be expected to be least in the final years, when decarbonisation of the grid is most likely to have occurred.”

It is hard to read this as consistent with the view that CCGT is the marginal source of energy displaced throughout a facility’s life. Discussions with the GIB confirm that they are making the same error by reading the annual carbon intensity figures in the DECC data tables as constants for a facility constructed in a given year.

As a result, the GIB is supporting projects which are rapidly becoming the least favourable option for waste management in terms of carbon, and the most carbon intense source of electricity to be found in the UK. Such an institution hardly merits the label “green”.

Before committing millions of pounds to projects with very dubious credentials, the GIB could easily check their interpretation of the Guidance, just as I did, with the people who wrote it. Since I was told my interpretation is correct, they’d presumably have found that their interpretation is wrong. The GIB would then be forced to recognise that the large investments they have made in the waste sector are not green ones.


Dominic Hogg




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2 Comments on "Talking GIB-berish"

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Shlomo Dowen
Shlomo Dowen
1 year 2 months ago

The question of how ‘green’ the GIB’s investments are is a very important topic. The GIB should be investing in the circular economy, not funding new incineration capacity that locks us into burning valuable resources. GIB investment in the Derby incinerator, for example, amounts to investment in a disposal (D10) facility, at the very bottom of the waste hierarchy. The GIB’s investment has led directly to Derby City Council deciding to cut recycling services rather than investing in reducing contamination, e.g., via better education, sorting infrastructure, accepting a wider range of material for recycling, etc.

Hilary Vick
Hilary Vick
1 year 2 months ago

I totally agree with you Dominic. The GIB shows a total lack of imagination in how to prevent/reduce waste. For instance how about investing in local laundries that could wash and disinfect textiles, including duvets, curtains, blankets etc with ozone? This could significantly reduce soiled textiles going to landfill/incineration. These could go back into circulation or be used for upcycling.